Market Update US tsys trading lower on ‘risk on’ session, yields 1.5-2bps higher, US 10Y 3.175%. Equities firmly higher on earnings, DOW +187, S&P +19. GS Q3 eps beat $6.28 vs $5.38 on stronger IB, stock +1.4% pre-mkt. Morgan Stanley +3.0% pre-mkt also on IB. Core EGBs mixed – gilts slightly lower, lagging the rally in bunds – stalemate over Irish border impacting Brexit talks, while the 10Y bund yield rallied to a two-week low 0.48%. GOCs lower in line with tsys, GOC 10Y back above 2.50%. Provis tighter, Ont 28 63/62.5 (-0.5bps), rumours of Ontario long deal – Ont 48/28 box fairly steady @ 15.7bps yet with the latest steepening in the GOC 10s30s curve, long Ontarios are more appealing, the all in yield pick from Ont 28s -> 49s has gapped 5bps wider to 16.5bps over the past two weeks.
News headlines
U.K. Wage Pickup Takes Back Seat to Brexit for Bank of England (Bloomberg) The fastest wage growth in almost a decade is a sign that inflation pressures are building, but the Bank of England may not act until it gets clarity on Brexit. Data from the Office for National Statistics Tuesday showed average earnings excluding bonuses rose 3.1 percent in the three months through August, the most since January 2009.
Trump’s Trade War Means Boom Time for Some (Bloomberg) China’s exporters are gathered in their thousands in Guangzhou for the latest edition of the Canton Fair. We’re asking for their insights into how the escalating trade war with the U.S. is affecting their businesses and their outlook on the economy. Check back here over the next couple of days for rolling updates.
China Consumer Inflation Accelerates, Factory Prices Slow (Bloomberg) Chinese consumer inflation accelerated for a fourth month in September, with food prices jumping by the most since February, while the rise in households’ non-food costs slowed. The consumer price index rose 2.5 percent from a year earlier, according to data from the National Bureau of Statistics. That was the same as forecast in a Bloomberg survey of economists, and faster than the 2.3 percent report in August. The producer price index climbed 3.6 percent, compared with a 3.5 percent estimate and a 4.1 percent gain the previous month.
Stocks Gain, Treasuries Dip as Earnings Roll In: Markets Wrap (Bloomberg) Stocks climbed and Treasury yields ticked higher on Tuesday as investors looked ahead to the next wave of corporate earnings and further developments across a host of geopolitical issues. U.S. equity futures pointed up as Morgan Stanley and Goldman Sachs Group Inc. posted third-quarter results, beating estimates on some measures. European stocks also advanced, led by shares in Italy which rallied with the country’s bonds after the government reached an agreement on a budget. In Asia, Japan’s equities outperformed, while Chinese shares retreated. The yen declined, and the dollar edged up from close to a two-week low ahead of a U.S. Treasury currency-manipulation report expected this week.
Pompeo meets Saudi king over Khashoggi case, Turks to search consul’s residence (Reuters) U.S. Secretary of State Mike Pompeo met Saudi Arabia’s King Salman on Tuesday to discuss the disappearance of Saudi journalist Jamal Khashoggi, as Turkish police prepared to search the Saudi consul’s residence in Istanbul in a widening probe. Khashoggi, a U.S. resident and leading critic of the Saudi crown prince, vanished after entering the consulate on Oct. 2. Turkish officials say they believe he was murdered there and his body removed, which the Saudis strongly deny.
Canada home sales fall in September for first time in five months – CREA (Reuters) Resales of Canadian homes dipped 0.4 percent in September from August, the first decline since April, the Canadian Real Estate Association said on Monday. The industry group said actual sales, not seasonally adjusted, dropped 8.9 percent from a year earlier, while the group’s Home Price Index was up 2.3 percent from September last year.
Canada open to more trade with China now that USMCA is done: Trudeau (BNN) Canada is open to doing more business with China now that a trading agreement with the United States and Mexico has been finalized, says Prime Minister Justin Trudeau. « Obviously, China is the world’s second-largest economy and growing, and will remain an important place to do business and to look for opportunity, » Trudeau told the Fortune Global Forum in Toronto on Monday.
Overnight markets
Overview: US 10yr note futures are down -0.04% at 118-04, S&P 500 futures are up 0.53% at 2763.5, Crude oil futures are down -0.75% at $71.24, Gold futures are up 0.26% at $1233.5, DXY is down -0.08% at 94.985, CAD/USD is down -0.23% at 0.7717.
| Cda Benchmarks | Yield | Tsy Benchmarks | Yield |
| 2 Year | 2.303% | 2 Year | 2.866% |
| 5 Year | 2.406% | 5 Year | 3.025% |
| 10 Year | 2.51% | 10 Year | 3.167% |
| 30 Year | 2.531% | 30 Year | 3.347% |
US Economic Data
| 9:15 AM | Industrial Production MoM, Sep est 0.2% (0.4% prior) |
| Capacity Utilization, Sep est 78.2% (78.1% prior) | |
| Manufacturing (SIC) Production, Sep est 0.2% (0.2% prior) | |
| 10:00 AM | NAHB Housing Market Index, Oct est 66 (67 prior) |
| JOLTS Job Opening, Aug est 6900 (6939 prior) | |
| 16:00 PM | Total Net TIC Flows, Aug est 60.3b (52.2b prior) |
| Net Long-term TIC Flows, Aug (74.8b prior) |
Canadian Economic Data
| 8:30 AM | Int’l Securities Transactions, Aug (12.65b prior) |
Disclosure and Disclaimer
The following sources of information have been, or may have been, used partially or in their entirety to compile the herein provided CTI Capital Securities Inc. (“CTI Capital”) ‘Morning Comments.’ CTI Capital believes these sources to be generally reliable, however, as said sources are varied and from third parties, CTI Capital cannot guarantee the accuracy or completeness of said information: Canadian Press (CP); Bloomberg News (BN); Wall Street Journal (WSJ); Stone & McCarthy Research Associates (SMRA); New York Times (NYT); Financial Times (FT); Market News International (MNI); Globe and Mail; Associated Press (AP); CNW Group (CNW); Reuters; Business News Network (BNN); Market Watch; and others.
Ivan Greenstein, Stephan Buu, Hugues Savard
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilières Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230
Institutional Bond and Equity Desk
CTI Capital Valeurs Mobilieres Inc.
Tel : (514)-861-0240
Fax: (514)-861-3230